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Your Take: Trust A Financial Planner With Bad Finances?

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A few years ago I met with a financial planner who was probably the same age, or a few years older, as me. We chatted a little, discussed some of my future plans, and basically he tried to sell me on some products. It was all in all not exactly a valuable meeting but part of that was my fault, I didn’t really have future plans. I had just graduated college, started getting my first few paychecks, and I had no plans for anything. I was just living life as best I could now that I had some real money. If I met with a financial planner now, it’d probably work out a little differently.

This guy lost $6M overnight. David Shorr had been a long time employee of Lehman and amassed quite a little collection of shares, all of which were rendered worthless on Monday. David Shorr works as a “wealth adviser,” a senior VP, at Morgan Stanley now and it made me wonder if I’d actually want the guy being my adviser (not that I’d be able to afford him!).

What if you found out that your financial planner was bad about his or her own finances? Or a financial advisor or broker whose investment portfolio was a mess? Would that change your perception of his or her advice? Would you drop them if you discovered they were bad?

I probably would.

I agree with the argument that being a good financial planner has nothing to do with executing a financial plan. A good financial planner needs strong organizational skills, good analytical skills, and a whole host of other skills that have nothing to do with sticking with a plan. A good planner can establish a savings plan that can set you up nicely to meet your future needs, given some assumptions, but it’s ultimately up to you to save. The financial planner with bad finances could simply be bad at that last part, the saving part. I agree with all that.

But would you hire a landscaper if his front yard looked like it hadn’t even been mowed in a year?

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8 Responses to “Your Take: Trust A Financial Planner With Bad Finances?”

  1. CF says:

    I love how all of these “wealth advisers” (what BS!) pretend to be ignorant to what the company was up to. As far as I’m concerned, they know the risks they’re taking, and if they get burned being greedy, too bad for them. The people I feel bad for are the administrative staff who never had a chance to amass $6 million and are now without a job or nest egg.

  2. TJ says:

    I wouldn’t base my hiring decision on the advisor’s personal finances. Have you seen the inside of a contractor’s home? Yikes! My brother-in-law used to be a contractor and he did absolutely beautiful work, but never got around to finishing his own house. And how many lawyers do you know that don’t even have a will? Know any doctors that smoke, eat fast food and don’t exercise?

  3. Rick Morley says:

    You know the saying that the car mechanic’s car is the worst car on the block? I think this *can be*, the same. I like TJ’s example. Sometimes, you just don’t have time to take care of your own stuff, because you care so much about doing a good job for others. Likewise, I fix a lot of computers for friends and acquaintances, but mine is the oldest computer of anyone’s, and it is always breaking. Does it matter? Probably not.

    There are a lot of people that lost tons of money in this market. Personally, I would most like to have the financial advisor who hasn’t lost anything in this market, while still beating the market in a bull market. Is it possible? I don’t know of any.

    That’s why I just manage my own finances, rather than hiring someone else. I may not be doing the best, but at least *I* am doing it, and when things go wrong, I have no one to blame but myself.

  4. Meg says:

    I can see both sides. This Lehman broker (or “advisor” or whatever they’re calling them this year) obviously had a lot of faith and confidence in his own employer. That company made him a very rich man – until they made him a very broke man. He was betting on his company – like thousands of executives and all entrepreneurs do.

    That doesn’t mean he’s going to advise his clients to do the same – they have different goals and risk tolerances, and if he’s a halfway decend advisor he’ll take that into account. In that way, it doesn’t matter what bets he was placing personally or what his own finances looked like.

    As an aside, it always really freaks me out when i go to get my hair cut and the guy or gal with the scissors has some crazy punk hairstyle. I usually let them cut anyway, though my taste is more conservative – and they’re perfectly capable of doing the job I’m requesting.

  5. One thing that is unclear to me is whether the 6 million worth of LEH stock was restricted or not. In addition to that is LEH his only holding or not? Is that 6 million in stock or 6 million in options related to LEH stock?

    If the stock was unrestricted this guy should have been more diversified – being in the financial industry he should have learned from behemoths such as WCOM and ENE that large concentrations in one stock are bad.

    Anyways, LEH is up 300% today.. Maybe he should cash in his stock.

  6. Jackson says:

    I can also see it from both sides. I know that the best doctors aren’t necessary the healthiest people and the best sports coach might not be the best athlete.

    I remember a saying along the lines of, “The skill of doing and the skill of teaching aren’t often contained within the same body.”

    So for the most part I would be ok with it, as long as I got results. But I would definitely monitor closely…

  7. Double says:

    I agree with Jackson about the skill of doing and the skill of teaching. I would not based my decision on the person’s personal life. I would base my decision on the person’s reputation and references. I would base my decision to continue with the financial planner based on results versus a preset rate of return expected.

  8. Whoo hoo says:

    What if someone is just starting out (on a first or a new career) and has student loan debt and a low income and thus no portfolio?


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